The EU’s top court has been advised to dismiss an appeal by Poland and Hungary against rules that attach conditions to the delivery of EU payments to member states.

The challenge by the two countries was related to rules adopted in late 2020 that set up a system of conditionality for the protection of the EU budget, in the case of breaches of the principles of the rule of law in member states.

Poland and Hungary have been at loggerheads with the EU over a number of laws introduced in recent years, particularly those affecting the countries’ judicial systems.

EU budget

The two countries had called for the annulment of the regulations, arguing that they had been set up on an inadequate legal basis, and that they were incompatible with article 7 of the Treaty of the European Union.

Article 7 allows the use of sanctions against a member state, where there is “a serious and persistent breach” of EU values.

Advocate General (AG) Campos Sánchez-Bordona decided, however, that the rules being challenged did not apply to all breaches of the rule of law, but only those directly linked to the implementation of the EU budget.

“Compliance with the principles of the rule of law may be vitally important for the sound operation of public finances, and the proper implementation of the union budget,” the opinion said.

‘Appropriate’ basis

The AG found that both the purpose and the content of the regulation showed that it constituted a financial rule, within the meaning of article 322(1)(a) of the EU treaties. He said that this article was “an appropriate legal basis” for the adoption of the regulation.

The opinion also stated that article 7 did not preclude the EU from using other instruments to protect its rule-of-law principles.

The AG also said that the regulation set out clearly which of these principles were covered, and that member states were “sufficiently aware of the obligations deriving from those principles”.

The opinion is not binding on the Court of Justice of the European Union (CJEU), but the court usually follows an AG when delivering its final ruling.